🔗 Share this article

The allegation carries significant weight: that Rachel Reeves may have lied to Britons, spooking them into accepting massive additional taxes which could be used for increased welfare payments. However hyperbolic, this is not usual Westminster bickering; this time, the consequences are higher. Just last week, detractors of Reeves and Keir Starmer had been labeling their budget "a shambles". Now, it is denounced as falsehoods, and Kemi Badenoch calling for the chancellor's resignation.

This serious charge requires straightforward responses, so let me provide my view. Did the chancellor been dishonest? Based on the available evidence, no. She told no major untruths. But, despite Starmer's recent remarks, it doesn't follow that there's no issue here and we should move on. The Chancellor did misinform the public regarding the factors informing her decisions. Was this all to funnel cash towards "welfare recipients", as the Tories assert? No, and the figures demonstrate this.

A Standing Takes A Further Hit, But Facts Must Prevail

The Chancellor has sustained another blow to her reputation, however, if facts still have anything to do with politics, Badenoch ought to call off her lynch mob. Perhaps the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will satisfy SW1's appetite for scandal.

Yet the real story is much more unusual compared to media reports suggest, extending wider and further than the political futures of Starmer and his 2024 intake. At its heart, this is a story concerning what degree of influence you and I have over the running of our own country. And it should worry everyone.

First, on to Brass Tacks

After the OBR published last Friday a portion of the forecasts it shared with Reeves as she wrote the red book, the surprise was immediate. Not merely had the OBR not done such a thing before (an "unusual step"), its figures seemingly contradicted the chancellor's words. While leaks from Westminster suggested how bleak the budget would have to be, the watchdog's forecasts were getting better.

Take the government's so-called "iron-clad" rule, that by 2030 daily spending for hospitals, schools, and other services would be wholly paid for by taxes: at the end of October, the watchdog reckoned this would just about be met, albeit by a tiny margin.

Several days later, Reeves gave a media briefing so extraordinary it forced morning television to break from its regular schedule. Weeks before the real budget, the nation was warned: taxes were going up, with the primary cause cited as pessimistic numbers from the OBR, specifically its finding suggesting the UK had become less productive, investing more but yielding less.

And lo! It happened. Notwithstanding what Telegraph editorials and Tory media appearances suggested over the weekend, this is basically what transpired at the budget, which was significant, harsh, and grim.

The Deceptive Alibi

The way in which Reeves deceived us concerned her justification, because these OBR forecasts did not force her hand. She could have chosen different options; she could have provided other reasons, including during the statement. Prior to last year's election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The power of the vote. The possibility for national renewal."

One year later, and it is a lack of agency that jumps out in Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half portrays herself to be a technocrat at the mercy of factors outside her influence: "In the context of the long-term challenges on our productivity … any chancellor of any political stripe would be standing here today, confronting the choices that I face."

She did make a choice, just not the kind the Labour party cares to broadcast. From April 2029 UK workers as well as businesses are set to be contributing an additional £26bn a year in tax – but the majority of this will not go towards funding improved healthcare, new libraries, nor enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".

Where the Cash Really Goes

Instead of being spent, more than 50% of the extra cash will in fact provide Reeves cushion against her self-imposed fiscal rules. About 25% is allocated to covering the government's own policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, only 17% of the tax take will fund actual new spending, for example scrapping the two-child cap on child benefit. Its abolition "will cost" the Treasury a mere £2.5bn, as it was always an act of political theatre by George Osborne. This administration should have have binned it in its first 100 days.

The True Audience: The Bond Markets

Conservatives, Reform along with the entire Blue Pravda have spent days railing against how Reeves fits the caricature of left-wing finance ministers, taxing hard workers to spend on shirkers. Party MPs have been applauding her budget for being balm to their troubled consciences, safeguarding the disadvantaged. Each group could be completely mistaken: Reeves's budget was primarily targeted towards investment funds, speculative capital and the others in the bond markets.

Downing Street can make a strong case in its defence. The margins from the OBR were deemed too small for comfort, especially given that bond investors demand from the UK the greatest borrowing cost among G7 developed nations – exceeding that of France, which lost a prime minister, higher than Japan which has far greater debt. Coupled with our measures to cap fuel bills, prescription charges and train fares, Starmer and Reeves argue this budget enables the Bank of England to cut interest rates.

You can see that those wearing red rosettes might not frame it in such terms next time they're on #Labourdoorstep. According to a consultant to Downing Street says, Reeves has "weaponised" the bond market as an instrument of discipline over Labour MPs and the voters. It's the reason the chancellor can't resign, regardless of which promises are broken. It's why Labour MPs will have to fall into line and vote to take billions off social security, just as Starmer promised yesterday.

A Lack of Political Vision and a Broken Promise

What's missing from this is the notion of strategic governance, of mobilising the finance ministry and the central bank to reach a fresh understanding with investors. Also absent is intuitive knowledge of voters,